Persuasive Puffery

Sellers often make explicit or implicit product claims without providing evidence. Even when such “puffery” is pure cheap talk, we find it can be credible and help buyers make a better decision. Talking up one attribute of a product leads rational buyers to have a better impression of the product on that attribute, but also to have a worse impression of the product on other attributes. Such updating pulls in buyers who value the talked up attribute, while pushing away buyers who value other attributes. Puffery is persuasive overall when the initial probability of a sale is low so there are more buyers to pull in than to push away. This persuasiveness requires buyer privacy about their preferences — if the seller knows how much each buyer values each attribute then the seller tries to pander to them and rational buyers completely discount all seller claims. The legal distinction that permits puffery about subjective claims, but precludes puffery about objective facts, is shown to be consistent with the differences between cheap talk and persuasion models of communication. JEL Classification: D82, L15, C72, D72.